Now, the Memphis, Tenn., mutual-fund company led by O. Mason Hawkins is targeting much larger prey: Dell Inc.

ENLARGE

O. Mason Hawkins
European Pressphoto Agency

Rival bids for the computer maker that emerged over the weekend from activist investor Carl Icahn and private-equity firm Blackstone Group LP were fueled by Southeastern, which blasted the original takeover offer by Michael Dell three days after it was made in February.

Southeastern is the largest outside shareholder in Dell, with an 8.4% stake. Despite Monday's 2.6% price rise, the company's stock still is valued at about 14% less than what Southeastern paid.

A takeover brawl for Dell could give Southeastern the big score it has needed lately. While the firm has an excellent long-term record, the largest of its four mutual funds has trailed the Standard & Poor's 500-stock index by almost half a percentage point annually over the past five years, mainly because of its 51% loss in 2008.

The firm specializes in value investing, swooping in when a company is undervalued and waiting for a rebound. Southeastern typically holds only a few dozen stocks at a time and hangs on for four to seven years, while the average U.S. stock fund sells after an average of 15 months.

Southeastern, with roughly $35 billion in assets, is publicity-averse but doesn't shy away from throwing its weight around. Since 2000, the firm has made 697 securities filings disclosing that it held at least 5% of a specific company's voting stock.

That number of filings ranks 58th among all asset managers, according to an analysis by The Wall Street Journal, outranking many larger firms and even Mr. Icahn.

Mr. Icahn's offer for Dell includes buying shares for $15 apiece—a 9.9% premium over the $13.65-a-share bid by Mr. Dell and private-equity firm Silver Lake Partners. A Blackstone-led group offered at least $14.25 a share for Dell. A spokesman for Dell declined to comment.

Southeastern said Monday that it is "pleased that the alternative proposals…are structured to give shareholders the opportunity to continue to participate" in Dell's "future prospects, while also providing a higher cash component for shareholders who choose to exit their investment."

G. Staley Cates, Southeastern's president and chief investment officer, said before the two counteroffers that the mutual-fund firm gets aggressive only when it has to solve "a failure it has made in assessing management."

That leaves Southeastern "no choice other than trying to fix the situation if the odds of success are decent," Mr. Cates said. Still, "you generally won't see us telling management how to do their jobs. You have to know your limits."

The 65-year-old Mr. Hawkins, who started Southeastern in 1975, is slightly built, white-haired and courtly, said people who know him well. He grew up in Thomasville, Ga., where his parents owned a timber plantation.

Mr. Cates, 48, is roughly 6 inches taller, folksy and sometimes free with profanities, according to those who know him. His dad started Mid-America Apartment Communities Inc., based in Memphis and one of the Southeast region's largest publicly traded real-estate companies.

Pioneer CEO Scott Sheffield said he drove to Memphis from Irving, Texas, to meet Messrs. Hawkins and Cates after Southeastern bought a stake in Pioneer in 1998. They got along for a decade, but Southeastern went public with demands for a shake-up after Pioneer's shares fell in 2008.

Mr. Sheffield didn't agree with Southeastern's strategy, but Pioneer agreed to add three new directors to its board. They stayed even after Southeastern sold its stake in 2010 for more than four times the initial price.

"They were great shareholders," Mr. Sheffield said. "All except that one year."

R. Brad Martin, former chief executive of Saks Inc., joined the Dillard's board when Southeastern was pushing the retailer for deeper cuts in unproductive stores and inventory. "Having a very strong reminder of one or two things that are important can be helpful," he said. "When that comes from people who own 13% of the company, you listen."

The productivity push freed up capital for share buybacks, and the stock price jumped an average of 118% a year from 2009 to 2012. Dillard's declined to comment.

At Chesapeake, Southeastern was a driving force to unwind personal stakes held by co-founder Aubrey McClendon in the income produced by Chesapeake gas and oil wells. Southeastern also got three directors on Chesapeake's board, pressuring Mr. McClendon to retire, effective April 1.

A Chesapeake spokesman declined to comment. Southeastern is about $300 million in the red on its holdings of Chesapeake shares.

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